Small Budget Deal Makes Bigger One Less Likely - Parties Appear Unlikely to Find Common Ground After Two-Year Agreement (The federal deficit has been shrinking for months, although Congressional Budget Office economists have warned of wider longer-term deficits if current laws remain unchanged.)

From The Wall Street Journal:

The two-year budget agreement passed by Congress this past week likely marks the end of Washington's deficit-reduction efforts for the foreseeable future, rather than signaling a new beginning, lawmakers in both parties say.

Democrats want to put deficit reduction on the back burner. Many Republicans are giving up on winning major concessions from Democrats and President Barack Obama. And the deal has diminished the supply of small-bore deficit-reduction measures available to Congress—the "low-hanging fruit"—leaving mostly difficult issues on the table, such as cuts to entitlements such as Medicare.

 

"This is the last of the small deals," said Sen. Mark Warner (D., Va.), a leading advocate for a long-term deficit-reduction plan. "There are no more deals that can be put together with cats and dogs."

 

Some Republicans promise to push for more deficit reduction as a condition of passing the next increase in the federal debt limit. But their leverage is limited. And they were reminded this past week how hard it is to make even small cuts in popular benefit programs. Members of both parties howled when the budget deal included savings from slowing the growth of—not even cutting—some military pensions.

 

Rep. Paul Ryan (R., Wis.), co-author of the budget deal, says a shift in the makeup of Congress is needed before lawmakers tackle entitlements. "Elections have consequences," he said before the House approved the budget deal he negotiated with Sen. Patty Murray (D., Wash.). "To really do what we think needs to be done, we are going to have to win some elections."

 

Democrats are already making clear that their 2014 agenda will be built around reducing income inequality, not reducing the deficit. The federal deficit has been shrinking for months, although Congressional Budget Office economists have warned of wider longer-term deficits if current laws remain unchanged.

 

"It is no longer the most important issue that we face," said Sen. Charles Schumer (D., N.Y.). The first issue before the Senate in January will be an extension of expanded jobless benefits, which would cost an estimated $25 billion if renewed for a year.

 

That is a welcome shift of focus for liberal Democrats, who have argued that concern about the deficit is overblown and that spending cuts are unwise with many Americans still unemployed. Some Democrats now argue that safety-net programs should be expanded, not cut.

 

"The absolute last thing we should do in 2013—at the very moment that Social Security has become the principal lifeline for millions of our seniors—is allow the program to be dismantled inch by inch," said Sen. Elizabeth Warren (D., Mass.).

 

Republicans seem resigned to securing no major budget cuts so long as Mr. Obama is president. "We've pretty much given up," said Sen. Dan Coats of Indiana, one of a group of Senate Republicans who met this year with White House staff for inconclusive budget talks.

 

The result could be that differences between the parties grow wider than ever in 2014.

 

The Ryan-Murray agreement may have plowed the last bit of common ground. The deal was built on the assumption that Republicans would never accept tax increases and Democrats wouldn't swallow entitlement cuts. The limited scope of the deal signaled pressure not to compromise on core principles was greater than pressure to reach for an aggressive deficit-reduction package.

 

Instead, the deal included a hodgepodge of fee increases and spending cuts in less-cherished programs.

 

The budget wasn't the only area in which this Congress had a hard time taking decisive action on big issues this year. Even with bipartisan support and powerful lobbying behind it, immigration legislation stalled in the House after passing the Senate. Gun-control legislation died in the Senate. A two-month extension of government funding stalled in September, creating a 16-day government shutdown that was an emblem of Washington dysfunction.

 

Against that backdrop, the Murray-Ryan budget deal was hailed as a major accomplishment. But as a deficit-reduction measure, it amounts to trimming split ends from waist-length hair. It reduces projected deficits $23 billion over an entire decade, out of a budget that runs well over $3 trillion a year.

 

By contrast, the 2011 Budget Control Act called for reducing projected deficits by $2.5 trillion over 10 years. The 2012 deal to avert the "fiscal cliff" reduced the deficit by $600 billion over a decade.

 

But like this past week's deal, neither the 2011 nor the 2012 laws made big changes in Medicare and other entitlements. This month's backlash against the proposal to curb military pensions is an object lesson in how hard it is to make such changes. Even a fiscal conservative such as Mr. Warner found that proposal hard to support, as he faces re-election in a state with a big military presence.

 

The options left require choices that pain one party or the other. "The question is whether our political system is too broken to confront those challenges and make those compromises," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a private group that advocates for deficit reduction.

 

But some liberals are delighted that Congress proved incapable of cutting entitlements.
 

"You're not hearing so much from Democrats anymore about cutting Social Security, Medicare and Medicaid," said Sen. Bernie Sanders of Vermont, an independent. "Now is the time to start focusing on jobs, on raising the minimum wage and the overarching issue of income and wealth inequality."